Chartist Talk: Sudeep Shah spots overbought signals in these 2 stocks, expects Nifty Auto index to hit record high in September

The optimistic momentum continued throughout the week, pushing the Nifty 50 to a high of 25,153 by Thursday. However, despite the strong rally, Nifty struggled to convincingly surpass the 61.8% Fibonacci retracement level from the previous correction phase (ranging from 25,669 to 24,337). This technical resistance led to profit booking on Friday, resulting in the formation of a bearish candlestick with a long upper shadow—a classic signal of selling pressure at higher levels.

On the daily chart, the index has formed an Evening Star candlestick pattern, which is generally considered a bearish reversal indicator. Combined with the rejection at the key Fibonacci level, this suggests that bullish momentum may be weakening, potentially setting the stage for a consolidation phase or a corrective move unless new positive catalysts emerge. Notably, during this pullback rally, the RSI was unable to breach the 60 mark.

Looking ahead, the support zone lies between 24,650 and 24,600, near the 100-day EMA, which will act as a critical cushion for the index. On the upside, the 25,050–25,100 range will serve as a key resistance area. A sustained breakout on either side is likely to trigger a directional move in the index.

Will be Bank Nifty break below its 100-day EMA, which has acted as a key support recently?

Bank Nifty continued to underperform relative to the broader market indices last week, reflecting ongoing weakness in banking stocks. After reaching a weekly high of 56,156, the index saw a sharp decline of over 1,000 points, eventually ending the week at 55,150, down 0.35%. This decline formed a large bearish candle on the weekly chart, indicating strong selling pressure throughout the week.

The relative underperformance is clearly reflected in the Bank Nifty/Nifty ratio chart, which has dropped to its lowest level in 65 days, signaling a further loss of strength in banking stocks compared to the broader market. From a technical perspective, the index is now trading below both its 20-day and 50-day exponential moving averages, with both averages sloping downward — a sign of weakening short- to medium-term momentum.

Further adding to the bearish outlook, the daily RSI is nearing the 40 mark, suggesting declining internal strength and rising risk of a continued downside. Without a strong reversal or supportive news flow, the index is likely to remain under pressure in the near term.

In terms of key levels, the 54,900–54,800 zone will serve as immediate support. A sustained move below 54,800 could trigger further downside toward 54,300, and potentially to the 200-day EMA level at 53,544. On the upside, the 55,600–55,700 zone will act as a crucial resistance for the index.

Do you expect the bullish momentum to continue in Poonawalla Fincorp and Aditya Birla Fashion & Retail next week?

Yes, both stocks are likely to maintain their upward trajectory in the coming sessions.

Poonawalla Fincorp has been consistently outperforming the broader market over the past few sessions. The stock is exhibiting strong bullish momentum, supported by favourable technical indicators across timeframes, suggesting that the uptrend is likely to continue.

Meanwhile, Aditya Birla Fashion & Retail (ABFRL) has delivered a Symmetrical Triangle breakout on Friday, backed by robust volume, which confirms the strength of the move. Notably, the stock formed a sizeable bullish candle on the breakout day and surged above its 20, 50, and 100-day EMAs, reinforcing the bullish setup. Additionally, the daily RSI has moved above the 60 mark, indicating strengthening momentum.

Given these technical confirmations, both stocks appear well-positioned for further gains in the near term.

What are your top two stock picks for the upcoming week?

Apollo Tyres

The stock has broken out of a falling channel pattern last week, signalling a potential trend reversal. The breakout was accompanied by strong volume, lending credibility to the move. On the weekly chart, the stock has formed a sizeable bullish candle — its first significant positive close since May 2025, indicating renewed buying interest. Technically, the stock has also moved above its key moving averages on both the daily and weekly timeframes, reinforcing the bullish setup.

Additionally, the daily RSI is hovering near the 60 mark, suggesting improving momentum. Overall, the combination of pattern breakout, volume confirmation, and improving momentum indicators points to a positive short-term outlook for the stock. Hence, we recommend accumulating the stock in the zone of Rs 466-462 level with a stop-loss of Rs 445. On the upside, it is likely to test the level of Rs 510 in the short term.

FSN E-Commerce Ventures (Nykaa)

Last week, the stock witnessed a breakout from a Stage-2 cup pattern on the daily chart, supported by robust volume, confirming strong buying interest. This breakout marks a significant technical development, especially as the stock is now trading near its all-time high, reflecting strong bullish sentiment. From a trend perspective, the stock is well-positioned above all its key moving averages on both the daily and weekly timeframes, indicating a well-established uptrend.

Moreover, momentum indicators are aligned with the bullish view, with the RSI firmly in bullish territory across both timeframes, suggesting sustained strength and room for further upside. Given the combination of pattern breakout, volume confirmation, and strong momentum, the stock appears poised for continued outperformance in the near term. Hence, we recommend accumulating the stock in the zone of Rs 225-223 levels with a stop-loss of Rs 215. On the upside, it is likely to test the level of Rs 250 in the short term.

Do you maintain a bullish view on UNO Minda and Paytm, given their ongoing higher high-higher low formations?

Yes, we continue to maintain a bullish view on both UNO Minda and Paytm, as their ongoing higher high–higher low structures indicate a well-established uptrend and strong price action.

However, from a risk-reward perspective, we advise caution in initiating fresh positions at current levels. UNO Minda is approaching the overbought zone, while Paytm is already trading within overbought territory, as suggested by momentum indicators. This implies the possibility of short-term consolidation or minor pullbacks before the next leg of the rally resumes.

Do you expect the Nifty Auto index to reclaim its record high in September?

Yes, we believe, the Nifty Auto is likely to reclaim is record high in the month of September. The index has delivered a strong breakout from a 13-week consolidation range on the weekly chart, signalling renewed bullish momentum.

The index has significantly outperformed the frontline indices, surging over 5% in the past week, and reaffirming its leadership within the broader market. This outperformance is further validated by the Nifty Auto/Nifty ratio chart, which has climbed to a 43-week high, indicating sustained relative strength in the auto space.

Technically, the index is trading well above its key moving averages on both the daily and weekly timeframes, reflecting a strong underlying trend. Adding to the bullish setup, the weekly RSI has crossed above the 60 mark for the first time since October 2024, a sign of strengthening momentum and growing investor interest in the sector.

Given these technical confirmations, Nifty Auto is well-positioned to continue its outperformance in the short term, barring any major market-wide disruptions.

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